Insiders are “shocked” at the nearly $5 billion price tag on Adobe’s acquisition of Marketo, which was officially announced on Thursday hours after Business Insider reported the big-ticket deal was imminent.
“Almost spit out my coffee,” said one source familiar with Marketo’s financials. “I’m shocked at that number.”
It’s unclear whether or not Adobe faced a bidding war, though several of Adobe’s biggest competitors did take a look during the sales process, multiple sources told Business Insider.
Vista Equity Partners, which bought Marketo for $1.8 billion in 2016, went to SAP early on in the sale process, according to one source, but SAP didn’t make a high enough bid.
“They wouldn’t pay the premium that Vista needed or wanted,” the source said.
Salesforce, which bought Marketo competitor ExactTarget for $2.5 billion on 2013, also took a look at the company around the same time as Adobe, according to multiple sources. Salesforce decided against bidding as of last week, according to one source, though its unclear whether that changed.
Many software companies have seen huge valuations this year in both acquisitions and initial public offerings. Salesforce acquired MuleSoft for $6.5 billion in April — a 32% premium from where it traded before the deal. And in June, Microsoft acquired GitHub for $7.9 billion, 3.75 times its $2 billion valuation in 2015.
At $4.75 billion, Marketo is Adobe’s biggest acquisition since at least 2005, when it paid $3.4 billion in stock to buy Macromedia.
Marketo reported just $321 million in revenue in 2017, according to Moody’s Investors Service Inc and cited in an analyst note from SunTrust Robinson Humphrey. That means the marketing company fetched a 14.8x revenue multiple.
Another source said that Vista paid between 6 and 7 times Marketo’s revenue run rate when it bought the company in 2016, and noted the multiple for the current deal with Adobe was double that level.
Adobe, SAP and Salesforce did not respond to requests for comment.
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